I have always wondered what direction this blog will take when I started it 2 months ago in Feb 2016. It seems to be a mix of the technical and psychological aspects of personal finance. As much as I like writing about the things we do and updating the numbers in our portfolios, income & net worth, I enjoy exploring the psychology of personal finance as well.

After all, our values and beliefs drive the actions we take for better or for worse. Besides, I’m about to turn 30 in June and there’s nothing like a major life milestone that makes you become more self-reflective. One valuable lesson we have learnt from our experience of studying, working & living in Australia & Singapore and getting on to this journey of financial independence is the importance of letting time pass.

I read personal finance blogs from all around the world and it’s amazing how we can be at such different stages of our lives but yet have the same goal. The problem for me is when I start reading about bloggers that have already achieved the goal. The way they lead their lives is how I imagine it would be like for us – to be able to focus & do what you want and what matters to you without the financial pressure to make it work out.

Working in the office

Even though we know the steps we need to take to get there, it might be another decade or more before we achieve it. We work in the accounting and banking industries as accountants. While not the most exciting occupation, the pay is decent and has already put us in a better financial position. If we keep working in the office for the next several years, it might even shorten the time it takes to reach financial independence. However, working in the office can be a real grind every day. If we are to jump out now and do something that matters more to us, it might lengthen the time it takes to achieve financial freedom.

Now you can start to understand the topic of this post. The more I think about it, the more I realise that when you have figured out what needs to be done, doing it is sometimes just a matter of letting time pass. We do what we can to increase our salary income by working hard & smart but no amount of career navigation will significantly shorten the time we need to get there. It really comes down to just not overthinking it at work, reducing our expenses and keeping ourselves focused on the goal.

What we also try to do on the side is build up another source of active income. This doesn’t refer to our dividend & interest income but should come from putting our effort into another active activity. Again, it takes time for the steps we take to yield results.

Investing

The same lesson applies to our investments as well. When we got serious with investing in 2015, we over allocated our cash on hand to the stock market because we were anxious to really make some ground in our journey to financial independence. In short, we rushed it. What should have taken years to build, we tried to do it in a matter of months.

The recent bear markets have taught us that you can’t speed this journey up by over-investing. We have to be patient, do more research, allocate cash to the stock markets according to our target asset allocations and wait for it to work. Buy consistently across time and even more so during bear markets but it can’t be done at once. That’s how we learn and that’s how knowledge compounds.

Personal Life

Time builds character and we have both grown up significantly since graduating from university. We have learnt not to over-plan when it comes to life because we have no idea what’s actually going to happen in the future. We couldn’t have imagined ourselves working in Melbourne, Sydney and Singapore over the next 7 years after graduating in 2009. How do we know what will happen in the next 7 years from now?

It’s frustrating to know that the mistakes we have made along the way have added years to the timeline. But those mistakes came from not being afraid to try and they made us who we are. As long as we keep ourselves focused on the goal of financial freedom, the importance of letting time pass is to allow ourselves to actually enjoy this journey wherever it might take us. Life doesn’t stop living and neither should we.

I liked my post on the net worth update but have to admit the method of calculation is almost always going to be up for debate. In my view, our net worth is an arbitrary figure to begin with and I am generally more concerned with the direction it is headed over time. As long as our net worth trends upwards positively with each month, I’m okay with that and the absolute figures don’t matter to us as much.

Global Financial Crisis and European Debt Crisis

However, the net worth update post did get me thinking about whether our asset portfolio & income can withstand a recession given the liabilities & expenses we have. Although we graduated in 2009 right after the Global Financial Crisis of 2007/2008, we were able to find jobs in Australia eventually and there was minimal impact on a very small investment portfolio. The European Debt Crisis of 2010/2011 had more impact on a then slightly bigger investment portfolio compared to 2009. However, it didn’t impact Australia’s economy as much and we were able to retain our jobs.

Overall, the resulting recessions from the Global Financial Crisis and European Debt Crisis did impact our jobs and might have slowed our career and salary progressions. However, we were young with no debt obligations and other than not taking the opportunities to grow our investment portfolio, there was minimal impact to our assets. We also had sufficient income to manage our expenses with savings leftover and life went on.

Oil Crisis

Now that our assets, liabilities, income and expenses have grown over time, I have no way of knowing how well we can withstand a crisis and recession. You could argue that we are now in the middle of an Oil Crisis of 2015/2016. Given how the MAS unexpectedly eased its monetary policy to try to jumpstart growth in Singapore, the risk of a recession has probably already increased to warrant such an action.

Preparation for a recession

Not like it matters or will change anything but I prefer not to have a recession. Every time it happens, I have come to realise that the main risk is to our jobs and salary income i.e. cash flow. Although our asset portfolio has increased significantly, the dividend & interest income is no where near replacing our salary income.

We have taken action to prepare for a possible recession by increasing our cash on hand and to hedge against the event of job loss. We have also increased the cash component of our investment portfolio to allow us to take advantage of falls in the stock market and maybe even the property market. We have cash holdings in Australia that we don’t disclose on this blog and even in our Google Sheet. This is our lifeline cash funds – not for emergency or spending. It’s for starting a new life in Australia if we don’t make it in Singapore. Now you know how seriously we take the threat of a recession.

Are we ready for a recession?

Despite preparing for a recession, I don’t actually know what will happen if it occurs and how severe it will be. What I have come to realise is that when something bad happens, everything else can go south at once. There are many things I have learnt from reading personal finance blogs in other countries. This Canadian blogger (Bridget Eastgaard at Money After Graduation) has a great post on the things she has learnt from Alberta’s recession. It seems like the Oil Crisis of 2015/2016 has already caused a recession in other countries like Canada. Go have a read about what’s it like to be in a recession and the far-reaching impacts it can have.

A recession can be an opportunity if you prepare for it. The way we have done it is to reduce our liabilities, increase the bond component of our investment portfolio and raise our cash holdings. I don’t see how we can recession-proof the equity component of our investment portfolio other than to accumulate more ETFs and shares if it happens.

This still doesn’t mean I would like a recession to occur. I can see how everything can go wrong at once e.g. being laid off without salary income, watching our stock portfolio & property values freefall and still have to deal with monthly expenses. Don’t underestimate how long you can be out of a job and running out of money while losing everything it took years to build might be something you never fully recover from. The big problem with a crisis and recession is how the after effects can structurally change a country’s economy. This can present a significant risk even in the recovery because can you be sure you won’t be left behind?

It’s easy enough to convince ourselves that my wife and I are still relatively young and can recover from a recession even if it is severe. We have done some stress testing of our net worth and cash flow under various scenarios to see how we can survive a recession.

I have come to realise that we are underestimating our reliance on the salary income from our jobs to manage our expenses. Even with our increased cash holdings, drawing them down to manage our expenses without any inflow of cash from salary income is going to hurt. This is not forgetting our dividend & interest income will go down as well due to dividend cuts and us no longer meeting the bank account requirements to earn the higher interest. Coupled with declining investment portfolio and property values, this is going to send our net worth down the drain no matter how we calculate it.

Ultimately, we will only know whether we are ready when it happens. We have gone through enough while working & living in Australia to know we can depend on each other in bad times. Our next big test will come soon enough and we are as ready as we can ever be.

Celebrated my wife’s 28th birthday over the weekend by having a nice dinner at Whitegrass. What caught our eye when choosing the restaurant was that the chef/owner Sam Aisbett trained in Quay and Tetsuya’s, which are our favourite fine dining restaurants in Sydney. The service & food were excellent and we even got to drop by the kitchen to speak to Sam himself!

It’s not that this personal finance blog is about to become a food blog. It’s just more interesting for me to mention our other interests as well. Yes, we like to eat at fine dining restaurants for special occasions and this is one of our main spending areas. It’s something that we have been doing since working & living in Australia and we have continued to do it here in Singapore even though it is more expensive.

I know how personal finance bloggers like me keep going on about reducing expenses and fine dining is definitely something we can cut back on. Makes you wonder why we continue to budget for this? Because it’s one of the core things that make up who we are as a couple. The pursuit of more savings, more investments, financial freedom etc can be never ending. But you must never forget what makes you happy. Sometimes, we become so focused on the goal of financial independence that we ignore and sacrifice many things to achieve it.

This post is not about encouraging one to spend freely on everything that makes you happy. It is about you figuring out what you should spend on that is important in making you happy. For us, we have worked hard to get to a point where we can budget for such fine dining expenses. More importantly, this is how we take the time and make the effort to dress up, date each other again and celebrate the many milestones we have achieved together. Here’s to thanking my wife for staying on this journey with me and to us for striving together!

Picking up from my previous post about blogging on the personal finance mistakes we have made, I was discussing how we graduated in 2009 in Melbourne. One of the most important decisions we made then was that we should move in together after graduation. This decision was borne out of necessity as it would have helped to reduce our cost of living in Melbourne when we started working.

That being said, we enjoyed each other’s company and wanted to take the first serious step in our relationship by moving in together officially. I will walk through how we came to the decision to rent a relatively new 2 bedroom unfurnished apartment in the city close to our workplaces and paid more than 30% of our net monthly income in rent. I will write this post as a series of questions just to make it more interesting and you can draw your own conclusions.

Where did we choose to stay?

We were staying in student accommodation close to the university during our undergraduate days and wanted to move out to a “proper” apartment in the city. Since we didn’t have family in Melbourne, we chose to stay in the city to be closer to our friends and to make it easier to go for a night out with them and our colleagues after work. Taking my unemployment at that time into consideration, I also thought it would facilitate going for interviews for job roles in the city. Although I did end up working in the city, I really should have considered job roles in the city fringe or suburbs close to the city.

The problem with staying in the city is that the rental cost will be higher than if you are to stay in the city fringe or suburbs. Yes, you save on transport costs from having to travel into the city but it still doesn’t add up to the higher rent you will be paying. The savings on “transport time” was a big factor for us since we didn’t want to spend too much time travelling to and from work.

Should we stay in a 1 or 2 bedroom apartment?

We wanted more space since we were both staying in small student accommodation apartments previously. We also wanted to be able to host our family, friends and colleagues at our place. This was despite the fact that we will probably be using the spare bedroom as a storage space for most of the time. We ended up paying quite a bit more in monthly rent for having that 2nd bedroom.

Should we stay in an older or newer apartment?

Our preference was to stay in a newer apartment although that would increase the monthly rent. The older apartments would have been fine but we wanted a nice place with a good view. This was coming from a couple who has barely started working and with one half unemployed.

Should we rent the apartment furnished or unfurnished?

We didn’t know how long we will be staying in Melbourne but decided on an unfurnished apartment anyway. We bought most of our furniture from Ikea but still ended up spending a lot of money on the TV, bed, sofa etc. The monthly rent on an unfurnished apartment is lower and it makes more sense to buy your own furniture only if you are planning to stay in the place for a long time. Although we ended up using our furniture for 4 years (moved most of them from Melbourne to Sydney but held to sell some of them off cheaply), it probably wasn’t as much savings as we thought.

What was our budget for rent?

Notice how this most important question comes after those above? That’s how we approached it then. As I was unemployed at the time of making this decision, the monthly rent for a relatively new 2 bedroom unfurnished apartment in the city would have been more than 50% of our monthly income (based on my wife’s salary alone). This was where I made one of the biggest mistakes of projecting my income. I didn’t think it would take a long time for me to find a job in accounting and I was anticipating a certain income level when I do find one. That way, we will be able to stick to the conventional 30% rule on rent i.e. monthly rent should not exceed 30% of our monthly income.

The problem was that projected income doesn’t count as actual income and it took me 6 months to find a full-time job that could meet the required income level. Another problem was that Australia’s personal income tax rates are higher than Singapore’s and it runs on a Pay As You Go (PAYG) withholding tax system. This means that a certain portion of your monthly income is withheld for tax purposes. You can see how this reduced monthly cashflow will have an immediate impact on our budget especially when we didn’t factor this in at the start.

Anyway, as part of my commitment to staying on in Melbourne, I brought over most of my savings from Singapore to Melbourne and told myself that if it runs out, I might have to head back to Singapore to find work. When I landed the full-time job after 6 months in Melbourne, I had A$300 left in my bank account. I only told my wife about this years after that.

Lessons learned

In Singapore, most young couples don’t rent an apartment before moving out together but this tends to be the norm overseas. Having to find a rental apartment and budgeting for the monthly rent taught us about what we look for when finding a place and what we can afford. For example, we were willing to pay more to live in or close to the city to save on travelling time but didn’t need to pay extra for a bedroom we weren’t using. In fact, buying the furniture together made us aware of our design asthetics early on in the relationship!

We realised we have to budget based on our existing and not anticipated income. This sounds like common sense but you will be surprised how hard it is to keep an objective perspective when you see an apartment you like. We got better with managing out rental situation when moving to Sydney but still ended up paying more simply because rental costs in Sydney are higher than in Melbourne.

During our lease renewal negotiations after one year, we found out that the owner was selling the apartment. The new owner was initially planning to stay in the apartment but decided to allow us to continue to rent the apartment. However, the new owner was raising the monthly rent by quite a bit. We went with a 2 year lease to minimise the next rent increase and prevent us from getting kicked out anytime soon. As you can imagine, we incurred higher break-lease costs when we decided to move to Sydney after one year. Sometimes, it’s better not to jump the gun and just let things play out.

Ultimately, managing our rental costs helped us to improve our budgeting skills. It’s funny how overpaying for rent made us better at managing all the other monthly expenses like utilities, broadband, groceries, entertainment etc. That’s how it works in real life, as long as you keep trying and learning, you will continue to build up your life experience and end up with having something to share even when you make a ton of mistakes like us!

I just realised I have written 3 consecutive posts on bank accounts for expense, emergency and investment funds. Goes to show how much I value taking the time to sort out your bank accounts. I actually went through this exercise with my sister. Her monthly salary was being credited into a POSB eSavings Account that was earning 0.05% pa. My sister submitted a form to HR to change the bank account to the OCBC 360 Account and now earns 1.2% pa just from the salary credit. It was easy enough to make 3 monthly bill payments online or through GIRO since she just had to change from the POSB eSavings Account that she was already making bill payments from for income tax and credit cards. That got her another 0.5% pa. My sister is now earning S$50 more per month from doing exactly the same things she was doing before, just with a different bank account.

Why write about Personal Finance?

I wonder how many people there are in the same situation, with the potential to earn higher interest income just by organising your bank accounts. Always start with the low-hanging fruit and focus on the basics of passive income before you start to think about investing!

This is the whole point of me writing about personal finance. I was one of those people! I made the mistake of not looking into my bank accounts after returning to Singapore from Australia in 2014 and went through a year of working with my salary being credited into the POSB eSavings Account. It just never occurred to me that I should review my bank accounts to earn a higher interest income. By making these mistakes and writing about what to do with your personal finances, I hope to shorten your learning curve so you won’t make the same mistakes.

This post is harder to write than I thought. The thing is, I want to write about the positive actions that you can take to improve your situation. With personal finance, it’s easy for me to write about the “good” things that I have done which is working out but leave out the “bad” stuff that I did which have or continue to impact my life negatively. Here’s to a series of posts (not consecutive cause I might want to stop writing permanently if I do it that way) about the mistakes we have made in our life. You can draw your own personal finance lessons from our experience. For me, it works more like a flashback to our past and a walk down memory lane. Who doesn’t like to reminisce?

The 4 years we spent working and living in Melbourne and Sydney have taught us the most about money so far. We have so many good and bad experiences from our time there that I might actually write about all of that eventually. Although we spent 3 years studying in Melbourne before that, it was more about having fun, meeting new friends, attending lectures & tutorials and having even more fun! Life as a working adult overseas sure is different from life as an undergraduate studying overseas. Let’s start from the beginning…

Graduation

When we graduated from university in 2009 in Melbourne, I was unemployed and trying to find work in 2010. I underestimated how difficult it would be for an international student to find work in a foreign country right after the 2007/2008 Global Financial Crisis. Long story short, I found work as a professional training course sales consultant, administrative assistant before landing a full-time job as a tax accountant at an accounting firm. This was over a period of 6 months and it’s probably worth a post just on my take about graduate unemployment and underemployment. My wife found a full-time role as an accountant at a bank earlier than me.

We were both struggling with being away from our families on a much more permanent basis, having to learn how to live together after just graduating, and adjusting to the working couple life. You can see how this makes for an environment to make plenty of mistakes in. I will write about the first big personal finance mistake we made on rental costs in another post!